Does it make sense to go in for pure risk cover insurance schemes ? It could if you understand the importance of providing risk coverage for yourself.


Pure risk covers do make a lot of sense. Risk cover is needed to ensure that you or your family is not caught unprepared in the unlikely event of a calamity. You need to protect yourself against this. There is a cost that is associated with having this security or comfort of a cover. This is the annual risk cover premium that you pay the insurance company in return for getting this assurance.

If you are looking at savings then you do not need to go to an insurance company for it. There are a number of avenues available for savings, growth in your wealth, income through returns, a large sum at the end of a period for your child's marriage or education and other such needs. You could choose from bank deposits, recurring deposit schemes, government bonds, company fixed deposits, post office schemes, public providend fund, mutual funds and many others including real estate and precious metals. If invested judiciously with care and good timing of entry and exit, these other avenues can actually generate more returns for you than insurance schemes.

What you need to reconcile yourself to is that the insurance company is going to take an annual charge in return for providing you the cover or assurance. This might not appear directly to you in some insurance policies, but it is a critical component and the savings option is built around this. Risk cover is the central theme for insurance companies and savings options are provided to make policies more attractive and provide the feeling that you are not paying an outright cost towards risk cover.

You will notice that a pure risk cover policy has a very low premium. This is because the company is under no obligation to return this amount or provide you any returns on it. By taking a pure risk cover policy you might be able to insure yourself for a much larger assured sum for the same premium. You will however need to accept that this amount is a charge or cost that you have to bear for this assurance and security.

Having provided for this risk, you can now invest your balance wealth into savings schemes that you think are best for your objectives. These could also be insurance policies if you like.